Forest City Halts All New Projects

Thu, 2008-12-11 20:29

This strikes me as smart given the circumstances, but also depressing considering it's the latest sign of how bad things have gotten in the retail real estate sector. The right thing for public real estate companies to do is to get balance sheets in order and make sure the properties it is already operating are in prime shape. Redevelopment makes more sense than new development. But at the rate we're going, how many new projects will we see at all in 2009?

Real-estate developer Forest City Enterprises Inc. said it will halt new projects and focus on reducing debt and managing its existing real-estate portfolio.

In a conference call Wednesday, Chief Executive Charles Ratner said Forest City will transition from a "development company with an operating portfolio to an operating company with a development capacity."

Shares in Forest City fell 15%, or $1.23, to $7.02 at 4 p.m. in composite trading on the New York Stock Exchange.

"Forest City has heavy debt and heavy development, both of which are a problem these days," says Rich Moore, analyst at RBC Capital Markets. The company has $2 billion of debt maturities over the next two years, according to company filings. Real-estate debt markets have seized during the past year, creating headaches for property owners needing to refinance mortgages and replace construction loans.

Forest City said it will continue some developments it has already started, including the $4 billion Atlantic Yards project in Brooklyn, N.Y. Plans for the 22-acre site include offices, apartments and a basketball arena.